The Future of Manufacturing: Implications for Supply Chains - PowerPoint PPT Presentation

The Future of Manufacturing: Implications for Supply Chains

Manufacturing Matters to Canada  A $620 billion industry  11% of GDP (18% in 2004)  1.7 million direct employees (2.2 million in 2004)  The largest payroll of any business sector  Two- thirds of Canada’s goods & services exports  80% of private sector R&D  85% of patents commercialized in Canada  Every $1 of output generates $3.50 in total economic activity ($3.05 in 2004)  The business of providing customer solutions combining the production of goods, new technologies, and services

Manufacturing Sales in Canada 60 55 Billions of Dollars per Month 50 45 40 Image Caption if needed 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Merchandise Export Performance 50 45 40 Billions of Dollars 35 30 25 20 Image Caption if needed 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Exports of Goods Exports excluding Energy

Manufacturing Sales by Province – Feb 2016 20 17.6 13.4 15 12.2 Year-over-Year Percent Change 10 3.9 5 2.4 1.7 0 -2.2 -5 -5.4 -10 -15 -13.8 -16.9 -20 Image Caption if needed -19.8 -25 Canada NL PEI NS NB QU ON MB SK AB BC

Manufacturing Sales by Sector Transportation Furniture Miscellaneous Equipment Electrical Equipment 2% 2% 2% 18% Food 15% Computers & Beverage & Tobacco Electronics 2% 2% Textiles Machinery 1% 6% Clothing 0.5% Fabricated Metal Products Paper 6% 4% Primary Metals Printing 8% 1% Petroleum Products Image Caption if needed Non-Metallic 14% Mineral Products Wood Products Plastics & Rubber Chemicals 2% 4% 4% 8%

Manufacturing Sales by Sector – Feb 2016 Food 7.7 Beverage & Tobacco 4.2 Textiles 5.1 Clothing -12.6 Leather Products 0.9 Paper 4.1 Printing -1.3 Petroleum Products -33.8 Chemicals 1.3 Plastics & Rubber 5.0 Wood Products 9.9 Non-Metallic Mineral Products 6.3 Total Manufacturing 3.9 Image Caption if needed -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 Year-over-Year Percent Change

Manufacturing Sales by Sector – Feb 2016 Primary Metals -1.4 Fabricated Metal Products 1.3 Machinery -9.5 Computers & Electronics -3.6 Electrical Equipment 2.7 Transportation Equipment 30.1 (Auto Assembly) 43.8 (Auto Parts) 18.5 (Aerospace) 31.3 (Other) -1.2 Furniture 7.1 Miscellaneous 7.0 Total Manufacturing 3.9 Image Caption if needed -20 -10 0 10 20 30 40 50 Year-over-Year Percent Change

Current Economic Challenges & Opportunities  Opportunities  Recovery in US consumer demand (?)  Competitive Canadian dollar  Growth in specialized product markets  Infrastructure investments  Challenges  Currency volatility  Oil & commodity price collapse = loss of demand in oil sands and mining developments  Financial turbulence  Slower growth in China and other “emerging markets”  Low/no growth in other major economies  Slow growth at home – high risk for consumers /housing market  Higher mandatory overheads (tax, user fees, regulatory compliance costs)  Regulatory obstacles – federal, provincial, inter-governmental, border, international

Long Term Trends  More demanding customers looking for immediate, customized, reliable, competitively priced solutions and expecting interaction with products that can serve a variety of interests  More demanding stakeholders – governments, investors, public  More intense competition – in both mass produced and specialized/innovative product lines  Aging population and skills shortages  Social challenges = new business opportunities  Health care, climate, environment, food, water, energy, security, social development  Digital revolution in manufacturing technologies

A Revolution in Manufacturing Technologies  Digital revolution – Computing power growing exponentially, costs of technology are falling  Industry 4.0 – Integration of cyber-physical systems  Advanced visualization, modeling, and artificial intelligence  Reconfigurable, and integrated automation, sensors, robots, lasers, & visual systems enabling product/process monitoring & control, data collection both vertically (from shop floor to top floor) and horizontally (across the value chain)  Internet of Things – “Internet of Value” – Real-time connection of products, processes, systems, customers, suppliers, networks of value  Big data & quantum computing – Data analysis enabling rapid decisions and new applications & services  Additive manufacturing/3-D Printing – Rapid prototyping and mass customization of complex parts  Micromachining – Nano-machines, Bio-machines  New materials – Lightweight, bio-nano-based, new alloys, printable electronics & smart materials  New energy technologies – Generation, storage, propulsion, renewables

The Future of Manufacturing  Customers will interact directly with products and design processes.  Products will be designed, tested, and engineered for production in cyberspace, using three-dimensional software, virtual and augmented reality  Instructions will be sent to smart machines and automated factories to make the products.  Software will optimize production processes and information flows across value chains – improving quality, reducing waste, increasing operating efficiencies, and speeding time to market for mass-customized products.  Products and processes will be information platforms allowing for life cycle maintenance, monitoring, control, data analysis, and new applications  More money will be made from services, data analytics, and apps than from products & production processes.

New Business Strategies are Required  Manufacturers will still need to be fast, flexible, efficient, compliant, & reliable  They will be producing more customized, complex products requiring greater precision and accuracy  Convergence of manufacturing, technology, service business models  Focus on customized solutions, not products  Value creation from services and data analytics  Responsibility for end-to-end product life cycles  Collaborative business models across international value chains to reduce risk and develop new opportunities  Financing will depend on cash flow & rapid payback – less on asset- based lending

Implications for Supply Chains  Premium on customized solutions  End-to end speed, efficiency, traceability, solutions, product management  Value networks will replace supply chains – reconfigurable product, service, & knowledge networks responding rapidly to changing business conditions and customer demand  Greater emphasis on collaborative partnerships for risk reduction, high speed solutions, business development, innovation  Prevalence of knowledge based “suppliers” – research centres and technology start-ups  Greater degree of localization in high value manufacturing  Globalization of information flows  Continuing shift in mass production/labour intensive manufacturing to lower wage economies